Transcript of "The state-of-retail-marketing"

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Executive Summary
I
t’s no secret that digitally empowered consumers are upend-
ing some tried and true business assumptions that the retail
industry has relied on for years. After all, these savvy shop-
pers are more informed, more engaged in all phases of the
purchasing process, and more enabled, thanks to the latest Web
and mobile resources. So, long before they lay down any cash,
they grab their trusty laptops and smartphones to gather product
information and read online reviews from friends, family and
complete strangers. As a result, they hunt for the best prices,
even when shopping for luxury goods, and they have heightened
expectations about the level of customer service they’re entitled
to get from retailers.
Surprising, though, is what it takes from a strategic and infra-
structure standpoint to understand and satisfy these clients. A
new survey entitled, “The State of Retail Marketing,” which was
conducted by UBM Tech and sponsored by Intel, found that many
retailers are fundamentally rethinking their go-to-market plans
and the front- and back-end operations that support these efforts.
For many retailers, making the right decisions about how to serve
digitally empowered shoppers can mean the difference between
surviving and thriving in today’s market.
By Alan Joch
Digitally empowered consumers are upending
some tried-and-true business assumptions the
retail industry has relied on for years. As a result,
making the right decisions about how to serve digi-
tally empowered shoppers can mean the difference
between surviving and thriving in today’s market.
Exclusive new research conducted by UBM Tech
and sponsored by Intel documents how retailers are
fundamentally rethinking their go-to-market plans
and finding ways to modernize the front- and back-
end operations that support these efforts.
The State of
Retail Marketing
An exclusive survey finds today’s digitally empowered consumers
are transforming the retail industry and creating important new
opportunities for innovative companies
Sponsored by

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“In a world where I can shop the Web for the lowest
price, the question for a brick-and-mortar store is, ‘How
are you going to compete?’ The answer is: ‘You’d better have
customers who are really, really loyal to you,’” says Laura
Davis-Taylor, senior vice president and managing director
of ShopWork, a BBDO Proximity domain practice devoted
to cross-channel shopping behavior. “To build loyalty, you
add value to their lives and make them feel [as if] they’re
not just buying a commodity, but that they’re experiencing
something that is important in their world.”
A Multitouch World
The practice of customers “showrooming,” instant reviews on
social media sites, and ubiquitous access to product informa-
tion all mean that retailers must deliver ever higher levels of
customer service and perform flawlessly across all the touch
points at which they interact with customers. Known by
insidersas“omni-channel”marketing,thisareaiswellknown
to the participants in “The State of Retail Marketing” survey,
in which companies large and small say they routinely con-
nect with customers across multiple venues.
The reality of omni-channel marketing and sales means
some tough challenges for retailers, especially for organi-
zations with back-end operations that maintain separate
customer data and fulfillment systems for each channel. But
some leading companies also see a way to gain a competitive
advantage. For example, Ahold USA is the $24 billion parent
company of a group of regional supermarkets that manage
nearly 800 stores throughout the Eastern seaboard. Brands
include Giant Food Stores, Martin’s Food Markets, and Stop
&Shop.AholdalsoownsthePeapodonlinegroceryanddeliv-
ery service, and rather than viewing the physical stores and
online operation as separate entities with unique customers,
Ahold looks for natural synergies. “Our strategy is to help the
customer through the key phases of planning, acquiring and
enjoying our products,” says John Dettenwanger Jr., CIO at
Ahold USA. “To do that we need to take that omniview and
not force customers through a single channel.”
This means that in some markets, shoppers can now create
a shopping list online by entering product names or by using
their smartphones to scan the bar codes of items already in
their pantries. These customers may then choose to have
the order delivered to their door or have the items packed
and waiting for pickup at their local supermarket. This year,
Ahold will take this a step further when it rolls out 50 new
drive-through locations — some in its store parking lots,
others in space it leases from other companies. Online orders
The State of Retail Marketing
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Survey Methodology:
UBM Tech polled 159 executives in a cross-section of retail companies, ranging from e-commerce sites, to physi-
cal stores, consumer product and consumer packaged goods organizations, and the hospitality industry. Survey
participants primarily hold positions as senior executives, store managers, marketing directors, division managers
and chief marketing officers.
Figure 1. Which of the following are touch points you
use to engage your shoppers/customers?
Online
Email
In-store
Print media
Phone
Mobile
Brochures
Snail mail
Print Catalogs
Print media coupons
76%
73%
50%
46%
43%
42%
34%
22%
16%
15%
6%
Electronic wallet (e.g. NFC-enabled smart phone)
Note: Multiple responses allowed
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
“Omni-channel” is the new normal in retailing, with companies of all
sizes regularly utilizing multiple touch points to engage with customers.

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will be filled from a central warehouse and then moved to
these convenient satellite facilities. “You’ll pull in, someone
will put your order in your trunk, and you’ll drive off without
ever getting out of your car,” Dettenwanger explains.
Dettenwanger expects that many customers will choose
each of these options at various times depending on what’s
most convenient on a particular day. “We don’t see them as
Peapod customers or Stop & Shop customers — they’re all
the same customers.”
Consumers Expect Rewards
Providing high levels of flexible and dependable service is
just one challenge retailers face today. Many technologi-
cally savvy customers also expect retailers to recognize and
reward them as they move across sales channels. Executives
in “The State of Retail Marketing” survey understand that
providing a successful customer experience is a requirement
in today’s competitive environment. A high percentage of
the respondents say they can distinguish new from return-
ing customers, know their buying preferences and see
purchase histories across channels.
The data revealed a notable difference between small
companies (with 100 or fewer employees) and larger ones.
A solid 12 percent more small companies gave themselves
high marks for being able to identify new or returning cus-
tomers, compared to large companies.
This is significant because retailers who get this right
often enjoy a competitive advantage if they react with pro-
motions that turn first-time customers into regulars and
make loyal shoppers feel special. Conversely, stores that
underperform in this area risk losing a customer for good.
“What happens, whether it’s conscious or not, is that I,
as a consumer, may get angry when I know I’m a top-tier
shopper for a particular brand, but [the brand doesn’t] know
me,” Davis-Taylor says. “That’s a market opportunity for the
competitors that get there first.”
Likewise, giving shoppers the tools to check inventory
online or via mobile devices can have a big payoff. This is
still an emerging area, according to the survey, with about
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Figure 2. As the retailer of digitally empowered
consumers who are highly engaged, how well do you
do the following?
Know whether they are new or returning customers
Know preferred products, services offers, and the
preferred method to receive them
Provide personalized offers
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Retailers are putting greater emphasis than ever on knowing the
likes and dislikes of clients.
Maintain a personalized cross-channel history of all
purchases
Enable online or mobile check of in-store product
availability
Provide ways to purchase, track delivery & return via
any channel
4%
4% 4%
22%
2% 29%
7% 36% 57%
18% 38% 44%
69%
4% 40% 56%
9% 42% 49%
74%
1 - We do a poor job 2
3 - We do a good job
Figure 3. What are your biggest challenges?
Increasing margin
Upselling
Maintaining optimal inventory volume
Providing an integrated shopping experience
Cross selling
Opening new outlets
57%
44%
37%
32%
32%
13%
Note: Multiple responses allowed
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Maintaining profit margins is an ongoing concern, but now retailers
are also looking for new ways to expand sales and reduce costs.

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44 percent of respondents across large and small companies
saying they perform well in this area. Davis-Taylor notes
that one national discount shoe chain recently announced
it was putting this strategy into action. It unveiled a service
where an in-store shopper who can’t find the right size of
a desired style can scan the bar code on the box and see
whether another store or the e-commerce site has the size in
stock. “That tells me that I’m never going to waste valuable
time in a store and not find the shoes I want,” she explains.
“And that will make me go to that store more [often].”
The Payoff
Survey participants see important bottom-line benefits as
the reward for better serving digitally empowered clients
and breaking down the barriers that separate various sales
channels. Topping the list of business benefits is the desire to
successfully increase profit margins, which the respondents
placed at the top of their list of challenges. Related to this are
difficulties associated with boosting sales through upselling
and cross-selling. Smaller companies in particular were sen-
sitive to upselling challenges, with half of them seeing this
as a major problem versus 35 percent of large companies.
But the big question for many established retailers is:
What building blocks are required to achieve results like
these? “The State of Retail Marketing” survey found a clear
link between business success and having up-to-date and
comprehensive information about customers and invento-
ries across various touch points.
But survey respondents felt stymied by other challenges,
including tight budgets and technology hurdles.
In particular, respondents cited difficulties selling mod-
ernization strategies to key decision makers. Davis-Taylor
sees this playing out in the retailers she meets with. “You’ll
see a marketing guy with the right attitude, but he’s not
empowered by the people at the top,” she observers. “So [the
marketers] either don’t get the funding they need, or they
don’t get the cross-departmental support that’s required. I
have seen many of these projects fail because the necessary
teams aren’t working together.”
An Action Plan
Fortunately, thanks to new technologies and maturing best
practices, it may be easier for some retailers to implement
the necessary support systems for successful cross-channel
marketing. This can also help “change champions” demon-
strate a potential ROI that’s attractive enough to sway even
the toughest C-level skeptics. The trick is to focus on both
in-store and back-end operations which, when integrated
The State of Retail Marketing
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Figure 4. How important are each of the following to
your business?
Immediacy of information – to know what's happening
& when
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Retailers are putting greater emphasis on gathering accurate, real-time
information about individual customers, inventories and products.
A unified view of product and inventory data – to see all
inventory wherever it is
A singular view of each customer – to see and track
shopping in store, online, or mobile
2% 23%
4% 34% 62%
8% 28% 64%
75%
1 - Not very important 2
3 - Very important
Figure 5. What are the roadblocks that keep you from
overcoming these challenges?
Budget issues
Technical integration challenges
Difficulty demonstrating return-on-investment
Lack of executive sponsorship
Do not see the value in this type of strategy
Other (please specify)
66%
33%
30%
12%
7%
5%
Note: Multiple responses allowed
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Budget constraints outweigh technology challenges when it comes
to courting today’s digitally empowered consumers.

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effectively, can open up new business opportunities.
The first step is to create a true single operational view
across all sales channels. Ahold is linking together its Peapod
and grocery chain databases into a unified repository. To do
this, Dettenwanger and his staff are turning to middleware
that combines point-of-service (POS) and back-office sys-
tems. Also helping are emerging technologies, such as a
new class of IT appliances that house transactional data. “In
the past, I would have had to build a centralized customer
database and create a unifying number to have everything
linked. That’s a big job,” he says. “But now I can have every
piece of transactional data in a memory-resident appliance,
so if a customer scans a bonus card, we can correlate that
with other activities and create a master customer record
on the fly.”
That could be the basis for another new resource designed
for technologically savvy shoppers. Ahold will be rolling out
a new Peapod app with a tool called Guess My Order. “We
married our POS transactional history with the customer
data, so [that] statistically — depending on the day of the
month — we can pretty much predict what you’re going to
buy,” Dettenwanger says. “We can refine the predictions by
letting users edit the lists and use that information to refine
the algorithm.”
Plug Cost Leaks
The second step is to get control of inventory, which the
survey found to be a priority, especially if it gives customers
and sales associates more accurate information and helps
organizations optimize promotions.
Better inventory controls can go a long way toward
strengthening the bottom line. Survey participants say
they keep close watch on costly out-of-stock and overstock
items, with a significant percentage saying that the costs of
these problems can range as high as a quarter of a million
dollars in their operations.
Here, the survey identified clear differences based on
company size: Large companies were more likely to report
higher costs, with 32 percent saying the losses ran between
$50,000 and $249,999. By comparison, only 12 percent of
small companies experienced losses in this range.
Some organizations are using a new strategy to cut down
on these expenses.
A large department store chain recently announced it had
joined the ranks of retailers that are shipping some orders
from individual stores, according to William Kuipers, a
partner at Spaide, Kuipers & Co., a management consult-
ing firm specializing in multichannel retail operations and
fulfillment. “Although it may have a distribution center for
these orders, the company may opt to ship from a store
based on a set of business rules it has in place,” he says. The
benefit for store managers is that they suddenly have a larger
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Figure 6. Do you have technology systems in place
that allow you to do the following?
73%
56%
Note: Multiple responses allowed
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Retailers today increasingly see back-office operations as a key
to success.
Connect better with customers in store by providing
inventory intelligence
Optimize promotions in the store to reflect real-time
inventory and product pricing
Figure 7. How much has inventory distortion (i.e.
out-of-stock merchandise, overstocks) impacted you?
$0; I always have the exact right about of inventory
$1 - $49,999
$50,000 - $249,999
$250,000 - $499,999
$500,000 - $999,999
$1,000,000 - $4,999,999
51%
18%
18%
9%
1%
1%
2%
$5,000,000 or more
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Gaps in inventory management can be costly, especially when they
result in out-of-stock and overstocked items.

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audience than usual. “So I sell my overstock of size small,
pink T-shirts without taking markdowns by exposing them
on the Web,” Kuipers adds.
Enabling these sales are new order-brokering systems
that can track inventories in master distribution centers, as
well as in each store. “The company or each store may set
up rules about when to make inventory visible to help the
system decide which stock to pull from,” he says. “It might
be based on who has the most inventory, who’s closest to
the customer, or other factors.”
Get Closer to Customers
The third step to retail modernization is to use the com-
bination of unified sales channels and better inventory
controls to create targeted marketing programs for key
shoppers. Stores are starting to do this by tracking and har-
vesting the rich supply of in-store shopping-behavior data.
The survey found that while a majority of the respondents
can track how consumers engage a product, capturing
more granular data, such as how long a consumer’s eye lin-
gers on a message, is still something only a small number
of organizations are able to measure currently. Digital
signage teamed with gaze-tracking analytics can document
how long a shopper focuses on a promotion or product.
The best solutions also give retailers insights into the gen-
der and age group of the viewers.
Data like this is essential for developing and presenting
the right messages at the right time. “Gaze-tracking helps
us learn what types of messages people find valuable while
they’re in the store,” Davis-Taylor points out. “If I’m selling
laundry detergent, it’s probably a coupon that will get the
most attention. If I’m selling a video game for kids, the infor-
mation I want to see more may be reviews by other parents.
You’ve got to understand what the barriers are in peoples’
minds as they are weighing whether to buy a product —
and what’s most likely to tip them into making a purchase.”
Ahold is among the large retail chains that is making a new
commitment to customer data analysis. It recently created an
internal group devoted to data analytics and leveraging the
large volumes of transactional data Ahold collects.
Efforts like this will supplement current strategies for
forging closer relationships with customers. For example,
the organization recently sent out 1.6 million home mailers
to its various grocery store customers, and the vast major-
ity — 1.2 million — were unique, based on the recipient’s
buying preferences. Not only did the consumers receive
offers for products they’re likely to buy, but the stores
promoted items that, from a business standpoint, were
priorities to sell. The key is matching customer needs with
products. “If you get promotions for things you have no
intention of buying, it’s a waste of money and it under-
mines the credibility of the retailer,” Dettenwanger says.
“It looks like you’re just trying to be opportunistic rather
than helpful to consumers.”
Invest in the Future
Thesurveyparticipantshaveclearideasabouthowthey’llcon-
tinuetoevolvetheiroperationsinthefuture.PCIcompliance,
the underlying controls for securing credit card transactions,
ishighonthelist.Aclosesecondisthedesiretoimplementan
end-to-end solution that integrates sales channels and creates
a unified experience for demanding consumers.
In the end, solutions like these may help in-store loca-
tions reclaim business from online sellers and capitalize
on unique benefits that only physical retailers can offer.
“People still crave human interaction and experiences
that are multisensory and engage us emotionally,” Davis-
Taylor says. “It’s hard for an e-commerce transaction to
create much emotion beyond, ‘This transaction was quick
and it was easy.’ But a visceral emotion can happen in a
physical store when, for example, you smell or taste or
find something that’s fabulous and unexpected. There’s life
The State of Retail Marketing
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Figure 8. Which of the following are you able to
measure?
How consumers engage a product
How you create a more effective, engaging 1:1
marketing experience
Where a consumer's eye travels when they walk up to
the shelf
57%
41%
23%
How long a consumer's eye lingers on a message
How you move the consumer from a device (i.e. tablet
on shopping cart) to the shelf
How you move the consumer from digital sign screen
to the shelf
22%
21%
Note: Multiple responses allowed
Data: UBM Tech survey of 159 professionals responsible for
marketing strategy and plans in retail, consumer goods or the
hospitality industry, December 2012
Gathering information about consumers while they’re actively
shopping will help retailers deliver the right messages at the right
time to influence buying behavior.
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